One week, the buck is breaking down. The next, it’s ripping higher.
With commodity currencies rolling over, the dollar-yen sliding lower, and the US Dollar Index $DXY failing to hold its recent breakdown…
What’s it going to be this week?
So far, the Bulls are in control.
But that could change if dollar bears violate these critical levels…
First, track the 1.0915 zone for the euro:
A decisive break above that level will apply pressure on the buck and set an upside target of 1.1125.
Next, keep an eye on the pound.
The GBP/USD is pulling back following the completion of a six-month inverted head and shoulders pattern:
The pound’s breakout remains valid as long as buyers defend the 1.2815 level, which presents a significant hurdle for dollar bulls.
But you can bet the buck will rise if the GBP/USD slides below the former resistance.
A dollar rally will also intensify if Canadian dollar futures are undercutting 0.7265:
On the flip side, last week’s failed DXY breakdown could prove nothing more than a false start if buyers can support the loonie above the April pivot lows.
Regardless, it all comes down to the US Dollar Index’s 104 level:
My near-term bearish dollar bias looks pretty thin as long as DXY hangs above a shelf of former lows from April and June. (The lack of an oversold momentum reading last week doesn’t help the bearish case.)
A lower USD thesis will gain traction, but only if the pound retains its breakout, the loonie hangs above 0.7265, and the euro takes back the 1.0915 level.
Stay tuned.
–Ian
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